Reimagine traditional office leasing models
JLL explores membership leasing formats as the future of leasing in China
Shanghai, 1 December 2020 - In future, office leasing could face competition from a new model, where tenants would pay membership fees instead of rent, as landlords are compelled to keep up with increasing vacancies and the rapid rise of the new digital economy in China, according to JLL’s (NYSE: JLL) latest Tenancy Reimagined: Could memberships be the future of leasing? report.
Traditionally, corporate occupiers are expected to pay a fixed cost based on the amount of space rented and long leasing terms. However, a membership ecosystem would enable businesses and individuals the flexibility to pay for differing tiers of building access and benefits.
A monthly membership fee - a similar pricing regime to that commonly used by flexible workspace providers – can be charged according to what services the tenant uses. For instance, a big company might opt for 100 “diamond” membership cards, giving those staff members access to flexible office and meeting room spaces, use of car parks, gym and restaurants. Gold membership may offer all of those services minus the car parking, and silver could exclude access to the car park and the gym.
“With more corporates in China adopting flexible working arrangements, tenants are looking for more cost-efficient and productive ways to utilise space,” says Gavin Morgan, Chief Operating Officer for Greater China at JLL, “This means that landlords will want to be able to differentiate their office assets by offering users a desirable work environment and be willing to negotiate leasing formats imaginatively. Having a more flexible leasing model may be able to help landlords increase cash-flow and meet the evolving demands of corporate occupiers in a “new normal’.”
“The economics behind the membership ecosystem are powered by technology and data, which are reshaping effective allocation of space and how to charge for it,” says Anny Zhang, Head of Markets for China at JLL, “In addition to the need to provide employees with a healthy and safe work environment in the post-epidemic era, corporates are putting more focus on the social and wellbeing elements and the flexibility of these environments, which spurs continuous innovation. The membership ecosystem, enabled by technology, could break down the silos, between the various component parts of the assets by combining them into an overall tenant experience, which can satisfy different types of corporates and individuals.”
Recent figures from JLL’s research showed that vacant Grade A office space reached 7.8 million sqm in China’s four Tier 1 cities (Beijing, Shanghai, Guangzhou and Shenzhen) in the third quarter of 2020, with a total of 13 million sqm slated for completion in 2021 to 2023. Nelson Wong, Head of Research in Greater China at JLL, adds: “Rising vacancies and the growing supply of new builds are putting pressure on building owners to retain existing tenancy and expand clientele. With a membership ecosystem, owners can make more efficient use of their assets and drive more income, while providing a higher quality environment to occupiers at a potentially lower cost.”
“Exploring new partnerships, with the interests of landlords and tenants aligned, will give rise to alternatives to traditional leasing. We believe that this future of office leasing is likely to be an ongoing evolution, rather than a transformation to a specific model,” concludes Mr Morgan.
Read the full report here.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.